Wednesday, December 07, 2005

Lawmakers: US should prepare for global oil flow peak

While there is disagreement about when world crude oil production will hit its peak, the US should begin preparing for it now, two US House members told an Energy and Commerce subcommittee hearing on Dec. 7.

Reps. Roscoe G. Bartlett (R-Md.) and Tom Udall (D-NM) led off the hearing before the Energy and Air Quality Subcommittee because they lead the House Peak Oil Caucus, which has six other members.

"We started it to bring immediate and serious attention to this issue. The continued prosperity of the United States depends on its ability to act on this," Udall explained.

Bartlett, who has given 14 special-order speeches before the House on the subject since March, cited Shell Oil Co. geologist M. King Hubbert's 1956 prediction that US oil production would peak around 1970.

"If he was right about our country, there's no reason to believe that he wasn't right about the world. He predicted that its oil production would peak about now," Bartlett said.

Domestic oil production has declined every year since 1970 despite higher prices and improved technology, he told the subcommittee.

"To provide a smooth transition to a more secure and sustainable energy future, we need to invest the effort and the money to use energy more efficiently while developing alternative and renewable sources, especially in transportation," Bartlett said.

Udall called for a government initiative comparable to developing the atomic bomb at the end of World War II and putting a man on the moon in the 1960s.

"Over the past 100 years, fueled by cheap oil, the United States has led the revolution in the way the world operates. Replacing this resource is imperative in continuing our way of life," he said.

Varying outlooksBut three witnesses on a second panel varied in their recommendations and assessments of the situation. So did several members of the subcommittee.

"The United States, with 5% of the world's population, should not continue to consume 25% of the world's oil production if other countries are to have their fair share," said Kjell Aleklett, a radiation sciences professor at Uppsala University in Sweden.

He added that a global effort will be necessary to address the peak-oil problem, and technologically advanced countries such as the US will have to take the lead.

Robert L. Hirsch, senior energy program advisor at Science Applications International Corp., Alexandria, Va., said SAIC recently concluded, in an analysis commissioned by the US Department of Energy, that a maximum effort will be needed to mitigate problems resulting from the world's hitting an oil production peak.

"The timing was left open because we don't know when it would occur," Hirsch said. "But if we wait until it does, the world will have a problem with adequate liquid fuels for more than two decades. If we initiate a program more than 20 years before it occurs, we have a possibility of avoiding the problem."

But a Cambridge Energy Research Associates official said a field-by-field analysis of worldwide production and development finds "no evidence to suggest a peak before 2020, nor do we see a transparent and technically sound analysis from another source that justifies belief in an imminent peak."

Robert Esser, CERA's global oil and gas resources program director, said many predictions of an imminent worldwide oil production peak do not include potential contributions from natural gas.

They also rely heavily on exploration and production data companies file with the Securities and Exchange Commission that are overly conservative because they don't consider the contribution of improved technology, he said.

The fourth scheduled witness in the second group, Murray Smith, minister-counselor for Alberta at the Canadian Embassy in Washington, DC, submitted written testimony but was called away before he could speak.

Impact of technologyThe potential contribution of improving technology was a major area of disagreement, in terms of both increasing oil recovery and developing alternatives.

Hirsch said hydrogen looks technically but not economically feasible because breakthroughs still are needed in fuel cells and onboard storage. "We took an optimistic view, but don't bet on it. The things that are essential don't exist now," he said.

He sees more potential in coal-to-liquids conversion because it can be done with commercial technology. "In addition, the carbon dioxide that's produced can be used for enhanced oil recovery," he said.

Aleklett conceded that ultradeepwater oil production is making an increasing contribution to supply. But he added that Brazil, which many consider the world's leader in that effort, has found about 12 billion bbl of oil in deep water, which is not much in comparison to the world's annual total consumption of 30 billion bbl.

"Right now, there is no more intense exploration play in the world than Canadian oil sands," Esser said. "Companies are struggling to get into the play, buying interests from others who are running short financially. The ones that are there are expanding their projects to bring production on sooner. We see oil sands out to 2020 up to about 4 million b/d, up from the current 1 million b/d. By 2030, we see production reaching 6 million b/d."

But Bartlett said the Canadians are using more energy from gas to retrieve oil from tar sands than they are producing in btu terms, which is economically inefficient unless it involves gas that would be stranded otherwise. Aleklett said the Canadians are exploring nuclear power as a possible alternative.

Esser pointed out that technology already has reshaped US gas production. "Ninety percent of the natural gas drilling in this country now is toward unconventional sources such as coalbed methane and tight sands gas. Gas-related drilling has never been higher, but we don't see any way to turn around declining US production. We'll have to import liquefied natural gas," he said.

"But we could do more by improving access," the CERA official continued. "There are several instances where companies were awarded offshore leases and not allowed to develop them, such as [Gulf of Mexico Lease] Sale 181 and the Destin Dome. Access to promising lands in the Rocky Mountains also can be impeded at every step. Nobody seems interested in doing anything about this."

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